FEDERAL TAX OMBUDSMAN SECRETARIAT
REGIONAL OFFICE, KARACHI
Complaint No.315/Khi/Customs (135)1195/2010
Dated: 30.09.20101
Messrs Al-Hamra Trading Company
Room # 815, 8th Floor Uni-Plaza
I.I. Chundrigar Road
Karachi
… Complainant
Versus
The Secretary
Revenue Division
Islamabad
… Respondent
FINDINGS/RECOMMENDATIONS
Dealing Officer
: Mr. Justice ® M. Nadir Khan, Advisor
Authorized Representatives
: Mr. Muneeruddin, Advocate
Departmental Representative
: Mr. Muhammad Ashfaq, Deputy Collector
The Complainant imported a consignment declared as “yellow
sulphur clay” under H.S Code 2503.0000. The Department disputed the
declaration and classified the substance as “sulphur powder 99.9%
pure” (Midas SP 3.25) covered by H.S Code 2802.0010. The
Complainant was issued show cause notice on the charge of misdeclaration and vide Order-in-Original dated 21.06.2010 the goods
were confiscated with option to the Complainant to get the goods
released on payment of duty, taxes and redemption fine.
2.
The Complainant feeling aggrieved by the Order-in-Original filed
appeal under Section 193 of the Customs Act, 1969, before Collector
(Appeals). He also invoked the jurisdiction of Hon’ble FTO by filing of
complaint No.27 / Khi/ Custom (119)/1055/2010.
1
Date of registration in FTO Secretariat
2
3.
C. No.315/Khi/Customs (135)1195/2010
The Complainant was called upon to explain maintainability of the
complaint.
Appeal
In the meanwhile the Collector (Appeals) vide Order-in-
dated
21.07.2010
accepted
the
appeal,
remitting
the
redemption fine and penalty and ordering the goods to be released on
the basis of the declared value.
4.
After passing of the Order-in-Appeal, the Complainant filed
application claiming compensation of Rs. 2.0 million contending that on
account of illegal action of the Department he had suffered losses. As
the matter was no more subjudice before any court or authority, the
complaint was registered and notice was issued to the Secretary,
Revenue Division, Islamabad. However, before filing of reply by the
Department the Complainant requested for withdrawal of the complaint
with permission to file the same afresh. The Hon’ble FTO allowed the
request vide Findings/Recommendations dated 16.09.2010.
5.
The Complainant filed this complaint with the plea that the
consignment was firstly detained on the charge of violation of Rule 389
of the Customs Rules, 2001, and a penalty of Rs.5,000/- was imposed.
According to the Complainant, the adjudicating officer, Mr. Muhammad
Ashfaq, Deputy Collector, acting on the instigation of the Complainant’s
competitors, and in violation of the provisions of the Constitution of
Pakistan, Customs Act, General Clauses Act, Criminal Procedure Code
and Qanoon-e-Shahadat, issued a second show cause notice which
was duly replied to but the plea of the Complainant was ignored and
Order-in-Original dated 15.06.2010 issued on malafide grounds, which
was later set-aside by the Collector (Appeals).
6.
The Complainant labeling the action of the adjudicating officer as
hostile based on personal vendetta has prayed as follows:-That this Hon’ble Forum may kindly grant compensation to the Complainant
for amount of Rs.2,000,000 (Rupees Two Million only) for suffering additional
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C. No.315/Khi/Customs (135)1195/2010
expenses on account of demurrages and container rent for blocking the
goods and suffering mental torture and shatterment of the goodwill in the
market and disturbance in the business.
- Take disciplinary action against the Deputy Collector Customs namely Mr.
Muhammad Ashfaq for his act of delinquency and violation of the
constitutional and other rights of the Complainant.
- Cost of the complaint may also be granted.
7.
The notice of the complaint was issued to the Secretary, Revenue
Division, Islamabad.
In response, Mr. Muhammad Ashfaq, Deputy
Collector, filed parawise comments raising preliminary objection that in
view of Section 216 of Customs Act, the complaint was not
maintainable. According to the Department, in the first complaint no
case of maladministration was made out, and so the second complaint
was not maintainable.
8.
On merits the Department pleaded that in the first show cause
notice the charge was of violation of Rule-389 of the Customs Rules
and the second show cause notice was on the charge of misdeclaration. According to the Department the action was covered within
four corners of law. There was enough evidence about clearance of
commodity on higher value which was not placed before Collector
(Appeals). The Department denied that the adjudicating officer acted in
a malafide manner. According to the Department, the action was taken
in good faith on the basis of available evidence, and was justified. It
was further pleaded that clearance of earlier consignments on lesser
value could not create any right for release of future consignments on
the same value.
9.
The Complainant was provided copy of para-wise comments, but
he did not opt to file a rejoinder. The matter was fixed for hearing on
21.10.2010 which was attended by Munir Uddin Khan, Advocate,
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C. No.315/Khi/Customs (135)1195/2010
accompanied by the Complainant, while Mr. Muhammad Ashfaq,
Deputy Collector, represented the Customs.
10.
The AR filed written arguments with copies of GDs about
clearance of earlier consignments of same commodity on the value
declared by the Complainant. The AR contended that the malafide of
the adjudicating officer was proved by issuance of recovery notice
dated 26.07.2010 despite of the fact that the Order-in-Original on the
basis of which recovery was sought was set-aside on 21.07.2010.
11.
The DR was provided copy of written arguments filed by the AR.
He rebutted the plea of the AR about any malafide in the affair. It was
pleaded by the DR that evidence about higher value was available
hence the Department was under legal obligation to apply the same.
He supported his plea by filing copies of three GDs about import of
sulphur powder (Midas SP-325) which were cleared by applying HS
Code 2802.0010. The DR argued that the Collector (Appeals) neither
called for Department’s comments nor asked to submit the available
evidence of higher value. The DR contended that in the stated
circumstances the Departmental action could neither be termed as
illegal nor declared to be based on malafide. “All actions taken in good
faith are protected under Section 216 & 217 of the Customs Act and no
action taken in good faith amounts to maladministration,” he asserted.
12.
Submissions made by the parties have been considered, and the
record of the case perused minutely. The record reflects that during
processing of the GD the examination staff made following examination
report:“Container No.BMOU-2269428. CRN 10HC-142552/101610. Documents not found. Examined the
goods jointly with R & D staff. Declared Description: Yellow Sulphur clay: Found Description:
Midas SP 325 (Sulphur Powder) 99.9% pure up in PP bags, yellow powder form. Brand Miwan
Commercial Co Ltd. I/O Korea. (Printed on each bag). Qty 800 bags x 25kg net each bags. Total
net wt 20000kgs. Rep sample drawn and forwarded to CH lab through R & D for test to confirm
description, grade composition, and classification. 100% wt checked vide KICT wt slip
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C. No.315/Khi/Customs (135)1195/2010
No.165718 dated 05.06.2010 and found 20010 kg. The consignment comprising 06 containers.
The report pertains to the above container. Wt slip scanned. Images attached.”
13.
On the basis of the examination report, a show cause notice
dated 08.06.2010 was issued on the charge of violation of Rule 389 of
the Customs Rules for failure to place the requisite import documents in
the container. The Complainant did not contest the charge and opted to
pay fine of Rs. 5,000. Accordingly the matter was disposed of by
adopting the option exercised by the Complainant. In such view of the
matter, any objection at a later stage by the Complainant against the
action by the Department for violation of Rule 389 of Customs Rule
cannot be held as valid.
14.
The record also reflects that the Complainant paid the duty and
taxes on the declared value but before release of the consignment the
Deputy Collector namely Muhammad Ashfaq selected the GD for
scrutiny under Section 80 of the Customs Act. The Complainant was
issued show cause notice dated 16.06.2010 alleging mis-declaration as
Sulphur Clay was liable to be assessed at around $ 0.10/kg instead of
actual description Midas SP 325 (Sulphur Powder) valued at $
0.3060/kg. The charge was statedly based on the examination report
15.
The Complainant contested the charge, arguing that sulphur
being imported by tyre industry had additives and it was also oil coated.
As such the sulphur imported by the Complainant could not be
compared with the sulphur imported by the tyre industry. The
Complainant requested the Department to provide evidence of value of
similar quality sulpher. The Complainant pleaded that as the GD had
already been released under Section 80 of the Customs Act, the reassessment was not permissible under the law.
C. No.315/Khi/Customs (135)1195/2010
6
16.
The Adjudicating officer considering the reply unsatisfactory
proceeded with the adjudication and passed the Order-in-Original dated
21.06.2010. The operative para reads as under:“I have gone through the record of the case and examined the details of the contravention
carefully. Offence within the meaning of Section 32(1), in the light of examination report, is
established which is sufficient to adjudicate the case against the importers as per reported
facts. The contention of the Respondent is incorrect as he tried to evade duty and taxes
through mis-declaration of description and through declaring clay instead of powder, they tried
to conceal the purity of the goods, hence the value of the goods as well. I, therefore, in
exercise of the powers conferred under Section 179 and 181 read with Section 32(1) and 156(1)
clauses 9, 14 and 45 of the Customs Act 1969 order for the confiscation of the impugned goods
of the list of contravened items. However, taking a lenient view of the fact that the goods are
freely importable, the importer is given an option to have the goods released on payment of
redemption fine @ 35% of the customs value of impugned goods i.e. Rs. 109,795 under Sr.
NO.1 (c) of the table to SRO 499/09 dated 13 th June, 2009, in addition to the payment of leviable
duties and taxes assessed by the Group. Furthermore, a personal penalty of Rs.50,000/- is also
imposed against the importers”.
17.
The Complainant feeling dissatisfied by the above order filed
appeal before the Collector (Appeals) which was allowed vide Order-inAppeal dated 21.07.2010 in the following terms:“I have thoroughly examined the case record and given consideration to the arguments
advanced before me. There is nothing on record that the description declared by the appellant
related to any goods other than the ones imported in this case: it is evident that words Midas
SP 325 (Sulphur Powder) refer to the grade of the goods whereas the declared description
Yellow Sulphur Clay refers to the name by which the commodity is generally known. That is
why the HS Code of the goods has remained unchanged. I, therefore, rule that the charge of
mis-declaring description of the goods has not been established against the appellant.
Moreover, the department has not been able to submit any evidence, within the meaning of
Section 25 of the Act read with the Customs Rules, 2001, to the effect that the Customs value
of the goods imported in this case was US$ 0.3060/Kg and not US $ 0.10/Kg as declared.
Therefore, enhancement of the value of the goods from US $ 0.10/KG to US$ 0.3060/Kg is
unlawful and not maintainable in law. For the foregoing reasons. I remit the redemption fine
and
penalty
imposed
on
the
goods
and
the
appellant
respectively
and
order
release/assessment of the goods on the basis of the declared transaction value in terms of
sub-section (1) of Section 25 of the Act. The appeal is allowed in the above terms”.
18.
It would be relevant to point out that the examination report
referred above did not contain any allegation about mis-declaration.
According to the examination report, a sample was drawn from the
consignment which was forwarded to Lab to confirm description, grade,
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C. No.315/Khi/Customs (135)1195/2010
composition and classification. The record is silent about receiving of
any report from the Lab. In absence of report from Lab, issuance of
show cause notice on the charge of mis-declaration on the basis of
examination
report
was
obviously
not
just.
Furthermore,
the
Complainant in reply to the show cause notice denied the charge. He
distinguished his imported sulphur from the sulphur imported by the
tyre industry and asked for supply of evidence of higher value. The
adjudication officer neither supplied the evidence to the Complainant
nor mentioned it in the Order-in-Original. The Department for the first
time made reference to the evidence of higher value in parawise
comments and filed copies of three GDs which relate to period
subsequent to the import made by the Complainant. Besides the GDs
relate to tyre industry. In such view of the matter, the GDs which were
not available at the relevant time could not support the Department to
justify issuance of show cause notice. In the stated circumstances
when sample of the substance was referred to the Lab, issuance of
show cause and adjudication without availability of any evidence or
report from the Lab was departure from the established practice and
procedure. In such a situation, provision of Section 81 of the Customs
Act could be applied to avert delay in release of goods and avoid port
and container charges and also to save the Complainant from any loss
on account of detention of goods. However after determining the
specification of the substance and applicability of the HS Code
proceedings could be initiated if the Complainant was found to have
mis-declared the goods with motive to evade duty and taxes.
19.
The action taken by the adjudicating officer though was declared
to be invalid by Collector (Appeals), but it did delay release of the
consignment and the Complainant had to pay demurrage charges and
container rent.
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20.
C. No.315/Khi/Customs (135)1195/2010
The Department cannot be absolved of the liability on the ground
that the action taken in good faith is protected under Section 216 & 217
of the Customs Act and that it does not constitute maladministration. It
would suffice to observe that colorful exercise of powers without any
valid justification cannot be termed as bonafide.
FINDINGS:
21.
From the foregoing discussion it is evident that the adjudicating
officer, Muhammad Ashfaq did resort to acts of commission and
omission that amounted to maladministration as defined under section
2(3)(i)(ii) of the Federal Tax Ombudsman Ordinance, 2000.
RECOMMENDATIONS:
21.
FBR to –
(i)
direct the adjudicating officer, Muhammad Ashfaq to
furnish explanation, within 15 days, as to why the loss
caused to the Complainant may not be recovered from him
in addition to appropriate compensation and cost under
Section 22 of FTO Ordinance;
(ii)
direct to arrange for refund of demurrage and
container charges to the Complainant; and
(iii)
report compliance within 21 days.
(Dr. Muhammad Shoaib Suddle)
Federal Tax Ombudsman
Dated: _12-11-2010
*Waqas*/my